The recent influx of crowdfunding opportunities has seen a plethora of investors tap a growing number of new opportunities by joining like-minded individuals – pooling their finances together towards a common goal. From rewards-based crowdfunding to equity crowdfunding and beyond, the model seems to have no signs of slowing down – and for good reason. It primarily allows smaller-scale investors to enter varying industries at a fraction of the cost, in turn reducing risk. For those with deeper pockets, it allows for diversification.
As with any revolutionary introduction that disrupts a particular industry, crowdfunding has seen a series of remarkable deal-closures over the span of the last few years. Here’s taking a look at some of them that have garnered considerable attention across different crowdfunding platforms:
The likes of Kickstarter and Indiegogo have paved the way for smaller-scale investors and start-ups to test the water in this growing area of obtaining and providing funding via the World Wide Web. The concept basically involves many members of the public contributing to a cause or innovation where they are later offered a reward – more often than not the product they are funding itself.
The Pebble Smart watch is one example where total pledged figures far surpassed their initial goal – over US$20 Million was accumulated with an initial requirement of half-a-million. The founders used the platform to market their product to the masses, successfully leveraging bloggers and a media partner to spread the word of their venture – in the process creating a sound brand identity across the tech community and beyond.
Gaining much interest of late for several reasons, this form of crowdfunding has seen some relatively attractive funding amounts gathered for start-ups. This involves investors contributing larger amounts of funds towards business ideas in return for equity in the business itself.
Elio Motors – an automobile company founded by Paul Elio in 2009 – would have to be of mention here, managing to raise North of a whopping US$17 million in what was to allow for the first equity- crowdfunded company ever to be publicly listed. If that was not enough, the company boasts a valuation of over US$1 billion (as of March 2016). Impressive.
Allowing a growing number of investors to enter the property market at a fraction of the cost associated with the industry, real-estate crowdfunding promises to gain even more traction over the next several years. As the name suggests, the process involves investors collectively pooling money together to finance property projects.
Touted as the world’s first crowdfunded skyscraper built in 2015 – BD Bacatá skyscraper complex – a tower located in Bogota, the capital of Columbia, represented a new model for funding big building projects, with smaller donations from thousands of individual investors, rather than a handful of majors.
Not to be confused with equity crowdfunding, debt-based crowdfunding essentially allows investors to receive a debt instrument that gets repaid with interest. It is also often referred to as peer-to-peer lending.
Among the various examples of investors that have seen potential in this model is the example of UK based Industrial Metal Services (IMS) that managed to obtain over GBP 45 Million in 2016 through Nucleus Commercial Finance. This was particularly remarkable due to the fact that the company was in a sector that was seen as one which came with its own risks dues to the steel climate at the time.
It makes sense that the crowdfunding model is only going to get stronger over the next few years. What needs to be decided from the investor and start-up point of view is which medium to choose based on their requirements.